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November 2010

Disclosures regarding Amalgamation

By Himanshu V. Kishnadwala | Chartered Accountant
Reading Time 11 mins

From Published Accounts

1 TV Today Network Ltd. (31-3-2010)

From Notes to Accounts :

Pursuant to the Composite Scheme of Arrangement under the provisions of the Companies Act, 1956 (The Scheme), approved by the shareholders, sanctioned by the High Court at Delhi and the Ministry of Information and Broadcasting on November 21, 2009, February 24, 2010 and May 20, 2010, respectively, the undertaking of the radio broadcasting business of Radio Today Broadcasting Limited, a company engaged in the radio broadcasting and trading business (the Transferor Company), was transferred to and vested in the Company (the Transferee Company) with effect from 1st April, 2009 (Appointed Date). ‘The Scheme’, a copy of which was filed with the Registrar of Companies subsequent to the year-end on 13th April, 2010, is an amalgamation in the nature of merger and has been given effect to in these accounts under pooling of interest method.

In accordance with ‘The Scheme’, the Company will issue 1,655,999 equity shares of Rs.5 each as fully paid up to the equity shareholders of Radio Today Broadcasting Limited, in the ratio of 1 equity share of Rs.5 each fully paid up of the Company for every 6 equity shares of the face value of Rs.10 each fully paid up, held in Radio Today Broadcasting Limited towards consideration for the aforesaid transfer and vesting of radio business, which will be credited in its books at face value, pending issuance of the shares as at the year-end, the face value of Rs.8,279,995 has been credited to Share Capital Suspense.

In accordance with ‘The Scheme’, all assets and liabilities pertaining to the radio broadcasting business of the Transferor Company, as on the appointed date, have been incorporated in the books of the Company at book value and the excess of the Share Capital Suspense over the book value of net assets acquired, amounting to Rs.423,622,791, has been adjusted against Securities Premium Account of the Company. The unamortised licence fees pertaining to the Transferor Company and transferred to the Company pursuant to the Scheme, amounting to Rs.244,229,509 has also been adjusted against the Securities Premium Account. Further, the Company has determined the deferred tax assets, amounting to Rs.249,529,332, based on the assets and liabilities of the radio broadcasting business which has been adjusted with the General Reserve Account.

The accounting treatment in respect of excess of Share Capital Suspense over the book value of net assets acquired and unamortised licence fee are different from that prescribed by the Accounting Standard (AS) 14, Accounting for Amalgamations, notified u/s.211(3C) of the Companies Act, 1956 with respect of Amalgamation in the nature of Merger. AS-14 requires the difference between the amount recorded as share capital and the amount of share capital of the transferor company to be adjusted against reserve.

The difference in accounting treatment as above, in compliance with the High Court Order, is as permitted by paragraph 42 of the AS-14. As the said paragraph 42 of AS-14 requires disclosure of the impact of the amalgamation on all accounts, had the accounting treatment as per AS-14 been followed, this is given below for information.

Had the accounting treatment prescribed in AS-14 been followed, amortisation of intangible assets would have been higher by Rs.27,990,000 with its consequential impact on the profit of the Company, General Reserve would have been lower by Rs.423,622,791, Unamortised Licence Fees would have been higher by Rs.216,239,509 and Share Premium Account would have been higher by Rs.667,852,300.

2. Titagarh Wagons Ltd. (31-3-2010)

From Notes to Accounts :

25. (a) Pursuant to a Scheme of Amalgamation (the Scheme) sanctioned by the High Court of Calcutta by order dated September 14, 2009, Titagarh Steels Limited (TSL) and Titagarh Biotec Private Limited (TBPL) were amalgamated with the Company with effect from April 1, 2009 (the appointed date). The amalgamation has been accounted for under the Pooling of Interest Method as prescribed by the Institute of Chartered Accountants of India (ICAI). TSL was in the business of manufacturing of steel castings and TBPL was in the process of setting up biotech business. The transferred companies carried on all their businesses and activities for the benefit of and in trust for, the Company from the Appointed Date. Thus, the profit or income accruing or arising to or expenditure or losses arising or incurred by the transferred companies from the Appointed Date are treated as the profit or income or expenditure or loss, as the case may be, of the Company. The Scheme has accordingly been given effect to in these accounts upon filing of certified copy of the Order of the High Court at Calcutta on November 27, 2009 (the Effective Date).

(b) In terms of the Scheme, the following assets and liabilities of TSL and TBPL have been transferred to and stand vested with the Company at their respective book values with effect from 1st April 2009:

 

 

(Rs. in lacs)

Particulars

TSL

TBPL

 

 

 

Fixed Assets (Net, including

1,804.35

Nil

Capital work in progress)

 

 

 

 

 

Current Assets, Loans and

 

 

Advances

4,858.09

2.09

 

 

 

Total Assets

6,662.44

2.09

 

 

 

Less :

 

 

Current Liabilities and

 

 

Provisions

4,033.32

0.28

 

 

 

Loans

914.55

Nil

 

 

 

Total Liabilities

4,947.87

0.28

 

 

 

Net Assets

1,714.57

1.81

 

 

 

    c) The Company has issued 3,66,954 equity shares of Rs.10 each aggregating to Rs.36.70 lakhs to the shareholders of TSL on January 16, 2010, while in case of TBPL which was a wholly-owned subsidiary of the Company, all the shares held by the Company in TBPL were cancelled and extinguished.

    d) A sum of Rs.1288.85 lakhs being the difference between the amounts recorded as additional shares of the Company and the total share capital of TSL and TBPL has been adjusted and reflected as general reserve, instead of capital reserve as prescribed under Accounting Standard-14 in terms of the above court order.

    e) To make the accounting policies followed by TSL fall in line with those of the Company, a sum of Rs. 411.13 lakhs as on April 1, 2009 representing the impact of following accounting policy differences has been adjusted against General Reserve which as per Accounting Standard-5 should have been charged to Profit and Loss Account:

Particulars

Amount

 

(Rs. in lacs)

 

 

Depreciation

77.09

 

 

Liquidated damages (Net of Taxes)

334.04

 

 

Total

411.13

 

 

    f) Certain immoveable properties, investments, licences, contracts/agreements which were acquired pursuant to the above Scheme are in the process of registration in the name of the Company.3    HCL Infosystems Ltd. (30-6-2010)From Notes to Accounts:    The Scheme of Amalgamation (‘Scheme’) for merging the wholly-owned subsidiary Natural Technologies Private Limited (NTPL) with the Company u/s.391 to u/s.394 of the Companies Act, 1956 sanctioned by the High Courts of Delhi and Rajasthan vide their respective orders dated 11-8-2008 and 29-5-2009 has come into effect on July 6, 2009 from the appointed date of 1-7-2008. On the scheme becoming effective NTPL stands dissolved without winding up in the previous year.

Pursuant to the Scheme:

The amalgamation of erstwhile NTPL with the Company was accounted for under the ‘pooling of interest method’ in the manner specified in the Scheme and complies with the Accounting Standard notified u/s.211(3C) of the Companies Act, 1956 and the following balances as at July 1, 2008 of erstwhile NTPL was adjusted with the profit and loss account forming part of reserves of the Company

 

(Rs. crores)

 

 

Assets

 

Fixed assets (including Capital

 

Work-in-progress Rs.0.80 crore)

4.09

 

 

Deferred Tax Assets

0.13

 

 

Sundry Debtors

3.34

 

 

Cash & Bank Balance

0.78

 

 

Other Current Assets

2.19

 

 

Loans & Advances

0.03

 

 

Total

10.56

 

 

Liabilities

 

Current Liabilities and Provisions

3.68

 

 

Secured Loan

1.52

 

 

Unsecured Loan

1.34

 

 

Total

6.54

 

 

Net Assets acquired on

 

amalgamation (a)

4.02

 

 

Transfer of balances of

 

Amalgamated Company

 

 

 

Securities Premium Account

0.45

 

 

Profit and Loss

0.55

 

 

Revaluation Reserve

2.54

 

 

Total Reserves and Surplus (b)

3.54

 

 

Less :

 

Adjustment for cancellation of

 

Company’s investment in Transferor

 

Company (c)

8.41

 

 

Shortfall arising on Amalgamation

(7.93)

(a) – (b) – (c) = (d)

 

 

 

Adjusted with :

 

— Revaluation Reserve

5.70

 

 

— Profit and Loss Account

2.23

 

 

Total

7.93

 

 

4. Godrej Consumer Products Ltd. (31-3-2010)From Notes to Accounts:

    a) A Scheme of Amalgamation (‘the Scheme’) for the amalgamation of Godrej Consumer Biz Ltd. (GCBL) [a 100% subsidiary of Godrej & Boyce Manufacturing Company Ltd. (G&B)] and Godrej Hygiene Care Ltd. (GHCL) [a 100% subsidiary of Godrej Industries Ltd. (GIL)] together called ‘the Transferor Companies’, with Godrej Consumer Products Limited (the Transferee Company), with effect from June 1, 2009, (‘the Appointed Date’) was sanctioned by the High Court of Judicature at Bombay (‘the Court’), vide its Order dated October 8, 2009 and certified copies of the Order of the Court sanctioning the Scheme were filed with the Registrar of Companies, Maharashtra on October 15, 2009 (the ‘Effective Date’).

    b) The amalgamation has been accounted for under the ‘pooling of interests’ method as prescribed by AS-14 — Accounting for Amalgamations and the specific provisions of the Scheme. Accordingly, the Scheme has been given effect to in these accounts and all assets and liabilities of the Transferor Companies stand transferred to and vested in the Transferee Company with effect from the Appointed Date and are recorded by the Transferee Company at their book values as appearing the books of the Transferor Companies.

    c) The value of Net Assets of the Transferor Companies taken over the Transferee Company on Amalgamation are as under :   

 

 

 

(Rs. in lac)

 

 

 

 

 

Particulars

GHCL

GCBL

Total

 

 

 

 

 

 

Investments in

 

 

 

 

Godrej Sara Lee

 

 

 

 

Limited

4,741.61

14,958.91

19,700.52

 

 

 

 

 

 

 

 

Cash and Bank

 

 

 

 

Balances

1.34

15.02

16.36

 

 

 

 

 

 

Loans and Advances

0.30

0.30

 

 

 

 

 

 

Advance Taxes Paid

1.03

1.03

 

 

 

 

 

 

Current Liabilities

 

 

 

 

and Provisions

(2.94)

(15.31)

(18.25)

 

 

 

 

 

 

Provision for taxes

(1.20)

(1.20)

 

 

 

 

 

 

Net Assets

4,740.01

14,958.74

19,698.76

 

 

 

 

 

 

    d) GCBL and GHCL held 29% and 20%, respectively, in Godrej Saralee Ltd., which is a 49 : 51 unlisted joint venture company between the Godrej Group and Saralee Corporation, USA. As a result of the amalgamation, Godrej Sara Lee Limited has become a joint venture between the Company and Sara Lee Corporation USA.

    e) In accordance with the Scheme of Amalgamation, the Company has issued and allotted 30,296,727 equity shares having a face value of Re.1 each to G&B and 20,939,409 equity shares having a face value of Re.1 each to GIL, being 10 equity shares in the Transferee Company for every 11 equity shares held by them in GCBL an GHCL, respectively, as consideration for the transfer. Consequently, the issued, subscribed and paid up equity shares capital of the Company stands increased to 308,190,044 equity shares having a face value of Re.1 each aggregating Rs.3,081.90 lac.

    f) The excess of book value of the net assets of the Transferor Companies taken over, amounting to Rs.18,455.25 lac, after adjusting the expenses and cost of the Scheme which amounted to Rs.731.15 lac, over the face value of shares issued as consideration to the Members of the Transferor Companies has been credited to the General Reserve as per the Scheme.

    g) Had the Scheme not prescribed the above treatment, the balance in Security Premium Account would have been higher by Rs.19,165.65 lac, investments would have been higher by Rs.731.15 lac, Capital Reserve would have been higher by Rs.51.24 lac, the Profit and Loss Account and the General Reserve would have been lower by Rs.30.50 lac and Rs.18,455.25 lac, respectively.

    h) Since the aforesaid Scheme of amalgamation of GCBL and GHCL with the Company, which is effective from June 1, 2009, has been given effect to in these accounts, the figures for the current year to that extent are not comparable with those of the previous year.

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